Consumers’ perceived risk and hold and use of payment instruments

Consumer decisions regarding retail payment instruments entail private and social costs. Due to these social costs, policymakers are increasingly trying to understand the determinants of consumer payment choices as documented by the European Central Bank’s regular publications. This article contributes to this understanding by investigating the role of perceived risk. Based on an original survey of French consumers, we measure the effects of perceived risk on the decisions to hold and use the main retail payment instruments: cash, card and cheque. We point to the sequential dependence of the decisions to hold and use a payment instrument, and study jointly both decisions. The bivariate analysis based on risk factors shows that unavailability risk and time risk have the greatest transverse influence on holding and using payment instruments. Our results, robust to controlling for consumer characteristics, confirm their propensity for a quick-to-use and constantly available payment instrument. We discuss the relevance of our results for policy making purposes.